Revenue Neutrality Laser Talk

Question:  Why is revenue neutrality important for a carbon fee?

Answer: Revenue neutrality simply means that the money is sent back into the private economy instead of being spent by the government. In the Energy Innovation and Carbon Dividend Act, the ‘private economy’ starts with American households, because the spending decisions they make will send the clearest signal to the business and investment world about the need to decarbonize. It also assures that those people least able to bear the burden of increasing fuel costs do not bear the brunt of the burden from the policy.

Some may ask, Why not embrace a ‘revenue positive’ principle where government targets the money toward clean energy, efficiency upgrades, and green jobs?

Our main reason is because the decarbonization of our economy needs the cumulative brain power of ‘the crowd’ – scientists, engineers, farmers, builders, store owners, and everyone else – not just a few government officials trying to make optimal decisions while under pressure from politicians who often control their funding.

Because nearly 70 percent of our economy is consumer spending [1], putting carbon dividend cash into the hands of American taxpayers will stimulate climate-friendly decision-making all the way up from the corner store to the executive boardroom.

Many of the investments required to scale up a myriad of potential solutions will be very large and often risky. We don’t want to see all of those risks borne by government, but through a coordinated effort of government and private investors. Venture capital firms, banks, and entrepreneurs, seeing a predictable price signal and supportive government policy, will create breakthroughs in innovation that may be unimaginable at this point.

  1. “Shares of gross domestic product: Personal consumption expenditures,” FRED Economic Data, Federal Reserve Bank of St. Louis (27 Apr 2018).

This page was last updated on 01/01/19 at 22:00 CST.

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